Highlights include:
Mercury Systems, Inc. (NASDAQ:MRCY) (www.mrcy.com), reported
operating results for the second quarter of fiscal 2016, ended
December 31, 2015.
Management Comments“Our second fiscal quarter
was once again marked by very strong execution,” commented Mark
Aslett, President and Chief Executive Officer. “Thanks to
solid gross margins driven by revenue mix, and continued cost
discipline, our 6% increase in revenue resulted in an 18% increase
in adjusted EBITDA year-over-year. With the delivery of a
strong first half and a recently approved defense budget, we remain
on track to achieve our objectives for the year while we continue
investing in the business to drive future growth. As a result, we
are comfortable raising our guidance for the balance of the year,”
Aslett concluded.
Second Quarter Fiscal 2016 Results Second
quarter fiscal 2016 revenues were $60.4 million, an increase of
$3.3 million, or 6%, compared to the second quarter of fiscal 2015.
GAAP income from continuing operations for the second quarter of
fiscal 2016 was $4.8 million, or $0.14 per share, compared to GAAP
income from continuing operations of $2.9 million, or $0.09 per
share, for the prior year’s second quarter. Adjusted earnings
per share (“adjusted EPS”) was $0.23 per share, for the second
quarter of fiscal 2016, compared to $0.20 per share in the second
quarter fiscal 2015. All per share information is presented on a
fully diluted basis.
Second quarter fiscal 2016 adjusted EBITDA was $12.6 million, an
increase of 18% from the second quarter of fiscal 2015.
Total GAAP net income for the second quarter of fiscal 2016 was
$4.8 million, or $0.14 per share, compared to total GAAP net income
of $0.3 million, or $0.01 per share, for the prior year’s second
quarter. The second quarter of fiscal 2015 included a loss of
($2.6) million, or ($0.08) per share, from discontinued
operations.
Cash flows from operating activities in the second quarter of
fiscal 2016 were a net inflow of $11.9 million, compared to a net
inflow of $8.2 million in the second quarter of fiscal 2015.
Free cash flow, defined as cash flow from operating activities less
capital expenditures, was a net inflow of $10.6 million in the
second quarter of fiscal 2016, compared to a net inflow of $7.0
million in the second quarter of fiscal 2015.
The Company’s reported financial results are from continuing
operations for all periods referenced in this release unless
otherwise noted.
Bookings and BacklogBookings for the second
quarter of fiscal 2016 were $45.2 million, yielding a book-to-bill
of 0.75 for the quarter. Mercury’s total backlog at December 31,
2015 was $204.8 million, an increase of $12.7 million from a year
ago. Of the December 31, 2015 total backlog, $151.6 million
represents orders expected to be shipped over the next 12
months.
Revenues by Reporting SegmentMercury Commercial
Electronics (MCE) — Revenues for the second quarter of fiscal 2016
from MCE were $53.0 million, representing an increase of $1.2
million, or 2.3%, from the second quarter of fiscal 2015. The
increase in revenues compared to last year’s second quarter related
primarily to higher SEWIP and DEWS program revenues.
Mercury Defense Systems (MDS) — Revenues for the second quarter
of fiscal 2016 from MDS were $7.9 million, an increase of $3.2
million, or 67%, from the second quarter of fiscal 2015, primarily
due to strength in an airborne surveillance program.
The revenues by reporting segment are adjusted for ($0.5)
million and $0.5 million of revenues included in our consolidated
results in the second quarter of fiscal 2016 and fiscal 2015,
respectively. This revenue is attributable to development
programs where the revenue is recognized in both segments under
contract accounting, and reflects the reconciliation to our
consolidated results.
Business Outlook This section presents our
current expectations and estimates, given current visibility, on
our business outlook for the current fiscal quarter and fiscal year
2016. It is possible that actual performance will differ materially
from the estimates given, either on the upside or on the downside.
Investors should consider all of the risks with respect to these
estimates, including those listed in the Safe Harbor Statement
below and in our periodic filings with the U.S. Securities and
Exchange Commission, and make themselves aware of how these risks
may impact our actual performance.
For the third quarter of fiscal 2016, revenues are currently
forecasted to be in the range of $63 million to $67 million.
Adjusted EPS is expected to be in the range of $0.19 to $0.22 per
share, and includes approximately $1.7 million of amortization of
intangible assets, $2.3 million of stock-based compensation expense
and an effective tax rate of approximately 36%. Adjusted EBITDA for
the third quarter of fiscal 2016 is expected to be in the range of
$11.3 million to $12.6 million.
Revenues for all of fiscal 2016 are currently expected to grow
between 6% and 8%, while adjusted EBITDA for fiscal 2016 is
expected to increase by 9% to 13% year-over-year based on revenue
mix expectations in the second half of the year.
Recent HighlightsDecember – Mercury Systems
announced that it acquired Lewis Innovative Technologies, Inc.
(LIT). A privately-held company based in Decatur, Ala., LIT is at
the forefront of technology development necessary to protecting
systems critical to national security while meeting strict DoD
Program Protection Requirements. The Company intends to maintain
LIT's presence in the Huntsville, Ala. tech corridor.
November – Mercury announced that its Mercury Defense Systems
(MDS) subsidiary was awarded a firm-fixed-price, indefinite
delivery/indefinite quantity (IDIQ) time and material contract
worth up to $41.8 million to deliver 200 advanced miniaturized
Digital RF Memory modulators (Mini DRFM) to the U.S. Navy. The
contract was received in the Company's fiscal 2016 second quarter.
The work will be performed at the Company's Cypress, Calif.
facility and is expected to be completed in November 2020.
November – Mercury announced that its MDS subsidiary received a
$1.8 million order from a leading international aerospace and
defense company for radar environment simulation equipment. The
order was booked in the Company's fiscal 2016 first quarter and is
expected to be shipped over the next several quarters.
November – Mercury announced support for the expanded
industrial-grade Intel Xeon Processor D-1500 Product Family with
new embedded open systems architecture (OSA) form factors and
configurations. The new configurations will feature broader
processor core count and power options, greater ruggedness and
extended reliability, providing even more server-class processing
power at the tactical edge.
October – Mercury announced it received a $22.7 million
follow-on order from a leading defense prime contractor for
advanced radio frequency (RF) microwave tuners and intermediate
frequency (IF) receivers for a naval electronic warfare (EW)
application. The orders were booked in the Company's fiscal 2016
first quarter and are expected to be shipped over the next several
quarters.
Conference Call Information
Mercury will host a conference call and simultaneous webcast on
Tuesday, January 26, 2016, at 5:00 p.m. ET to discuss the second
quarter fiscal 2016 results and review its financial and business
outlook going forward.
To join the conference call, dial (877) 303-6977 in the USA and
Canada, or (760) 298-5079 in all other countries. Please call five
to ten minutes prior to the scheduled start time. The live audio
webcast can be accessed from the 'Events and Presentations' page of
Mercury's website at www.mrcy.com/investor.
A replay of the webcast will be available two hours after the
call and archived on the same web page for six months.
Use of Non-GAAP Financial Measures In
addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, the Company
provides adjusted EBITDA, adjusted income from continuing
operations, adjusted earnings per share “adjusted EPS”, and free
cash flow, which are non-GAAP financial measures. Adjusted
EBITDA, adjusted income from continuing operations, and adjusted
EPS exclude certain non-cash and other specified charges. Free cash
flow is defined as cash flow from operating activities less capital
expenditures. The Company believes these non-GAAP financial
measures are useful to help investors understand its past financial
performance and prospects for the future. However, these non-GAAP
measures should not be considered in isolation or as a substitute
for financial information provided in accordance with GAAP.
Management believes these non-GAAP measures assist in providing a
more complete understanding of the Company’s underlying operational
results and trends, and management uses these measures along with
the corresponding GAAP financial measures to manage the Company’s
business, to evaluate its performance compared to prior periods and
the marketplace, and to establish operational goals. A
reconciliation of GAAP to non-GAAP financial results discussed in
this press release is contained in the attached exhibits.
Mercury Systems – Innovation That
Matters™ Mercury Systems (NASDAQ:MRCY) is the better
alternative for affordable, secure and sensor processing subsystems
designed and made in the USA. Optimized for program and mission
success, Mercury’s solutions power a wide variety of critical
defense and intelligence applications on more than 300 programs
such as Aegis, Patriot, SEWIP, F-35 and Gorgon Stare. Headquartered
in Chelmsford, Massachusetts, Mercury Systems is a high-tech
commercial company purpose-built to meet rapidly evolving
next-generation defense electronics challenges. To learn more,
visit www.mrcy.com.
Forward-Looking Safe Harbor
Statement This press release contains
certain forward-looking statements, as that term is defined in the
Private Securities Litigation Reform Act of 1995, including those
relating to fiscal 2016 business performance and beyond and the
Company’s plans for growth and improvement in profitability and
cash flow. You can identify these statements by the use of the
words “may,” “will,” “could,” “should,” “would,” “plans,”
“expects,” “anticipates,” “continue,” “estimate,” “project,”
“intend,” “likely,” “forecast,” “probable,” “potential,” and
similar expressions. These forward-looking statements involve risks
and uncertainties that could cause actual results to differ
materially from those projected or anticipated. Such risks and
uncertainties include, but are not limited to, continued funding of
defense programs, the timing and amounts of such funding, general
economic and business conditions, including unforeseen weakness in
the Company’s markets, effects of continued geopolitical unrest and
regional conflicts, competition, changes in technology and methods
of marketing, delays in completing engineering and manufacturing
programs, changes in customer order patterns, changes in product
mix, continued success in technological advances and delivering
technological innovations, changes in, or in the U.S. Government’s
interpretation of, federal export control or procurement rules and
regulations, market acceptance of the Company's products, shortages
in components, production delays due to performance quality issues
with outsourced components, inability to fully realize the expected
benefits from acquisitions and restructurings, or delays in
realizing such benefits, challenges in integrating acquired
businesses and achieving anticipated synergies, changes to export
regulations, increases in tax rates, changes to generally accepted
accounting principles, difficulties in retaining key employees and
customers, unanticipated costs under fixed-price service and system
integration engagements, and various other factors beyond our
control. These risks and uncertainties also include such additional
risk factors as are discussed in the Company's filings with the
U.S. Securities and Exchange Commission, including its Annual
Report on Form 10-K for the fiscal year ended June 30, 2015. The
Company cautions readers not to place undue reliance upon any such
forward-looking statements, which speak only as of the date made.
The Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which such statement is made.
Mercury Systems and Innovation That Matters are trademarks of
Mercury Systems, Inc. Other product and company names mentioned may
be trademarks and/or registered trademarks of their respective
holders.
MERCURY SYSTEMS, INC. |
UNAUDITED CONSOLIDATED BALANCE SHEETS |
(In
thousands) |
December 31, |
|
June 30, |
2015 |
2015 |
|
|
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
81,554 |
|
|
$ |
|
|
77,586 |
|
Accounts receivable, net |
|
35,468 |
|
|
|
|
|
31,765 |
|
Unbilled receivables and costs in
excess of billings |
|
24,645 |
|
|
|
|
|
22,021 |
|
Inventory |
|
36,707 |
|
|
|
|
|
31,960 |
|
Deferred income taxes |
|
12,363 |
|
|
|
|
|
12,407 |
|
Prepaid income taxes |
|
2,880 |
|
|
|
|
|
3,747 |
|
Prepaid expenses and other current
assets |
|
5,361 |
|
|
|
|
|
8,678 |
|
Total current assets |
|
198,978 |
|
|
|
|
|
188,164 |
|
|
|
|
|
Restricted cash |
|
264 |
|
|
|
|
|
264 |
|
Property and equipment,
net |
|
13,324 |
|
|
|
|
|
13,226 |
|
Goodwill |
|
173,749 |
|
|
|
|
|
168,146 |
|
Intangible assets,
net |
|
18,608 |
|
|
|
|
|
17,998 |
|
Other non-current
assets |
|
3,169 |
|
|
|
|
|
2,190 |
|
Total assets |
$ |
408,092 |
|
|
$ |
|
|
389,988 |
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
11,858 |
|
|
$ |
|
|
6,928 |
|
Accrued expenses |
|
8,719 |
|
|
|
|
|
9,005 |
|
Accrued compensation |
|
11,409 |
|
|
|
|
|
9,875 |
|
Deferred revenues and customer
advances |
|
9,406 |
|
|
|
|
|
7,477 |
|
Total current liabilities |
|
41,392 |
|
|
|
|
|
33,285 |
|
|
|
|
|
Deferred gain on
sale-leaseback |
|
350 |
|
|
|
|
|
929 |
|
Deferred income taxes |
|
2,287 |
|
|
|
|
|
3,108 |
|
Income taxes payable |
|
1,505 |
|
|
|
|
|
1,459 |
|
Other non-current
liabilities |
|
1,100 |
|
|
|
|
|
1,069 |
|
Total liabilities |
|
46,634 |
|
|
|
|
|
39,850 |
|
|
|
|
|
Shareholders’ equity: |
|
|
|
Common stock |
|
332 |
|
|
|
|
|
326 |
|
Additional paid-in capital |
|
259,140 |
|
|
|
|
|
254,568 |
|
Retained earnings |
|
101,221 |
|
|
|
|
|
94,468 |
|
Accumulated other comprehensive
income |
|
765 |
|
|
|
|
|
776 |
|
Total shareholders’ equity |
|
361,458 |
|
|
|
|
|
350,138 |
|
|
|
|
|
Total liabilities and shareholders’
equity |
$ |
408,092 |
|
|
$ |
|
|
389,988 |
|
|
|
|
|
MERCURY SYSTEMS, INC. |
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
December 31, |
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
Net revenues |
$ |
60,417 |
|
|
$ |
57,089 |
|
|
$ |
118,826 |
|
|
$ |
111,150 |
|
|
|
Cost of revenues (1) |
|
31,839 |
|
|
|
30,054 |
|
|
|
62,719 |
|
|
|
60,116 |
|
|
|
Gross margin |
|
28,578 |
|
|
|
27,035 |
|
|
|
56,107 |
|
|
|
51,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative
(1) |
|
12,583 |
|
|
|
12,677 |
|
|
|
24,709 |
|
|
|
24,967 |
|
|
|
Research and development (1) |
|
7,684 |
|
|
|
7,895 |
|
|
|
15,777 |
|
|
|
15,846 |
|
|
|
Amortization of intangible
assets |
|
1,638 |
|
|
|
1,762 |
|
|
|
3,351 |
|
|
|
3,524 |
|
|
|
Restructuring and other
charges |
|
221 |
|
|
|
1,162 |
|
|
|
559 |
|
|
|
2,430 |
|
|
|
Impairment of long-lived
assets |
|
231 |
|
|
|
- |
|
|
|
231 |
|
|
|
- |
|
|
|
Acquisition costs and other related
expenses |
|
(148 |
) |
|
|
- |
|
|
|
1,980 |
|
|
|
- |
|
|
|
Total operating expenses |
|
22,209 |
|
|
|
23,496 |
|
|
|
46,607 |
|
|
|
46,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
6,369 |
|
|
|
3,539 |
|
|
|
9,500 |
|
|
|
4,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
26 |
|
|
|
4 |
|
|
|
50 |
|
|
|
7 |
|
|
|
Interest expense |
|
(5 |
) |
|
|
(8 |
) |
|
|
(7 |
) |
|
|
(16 |
) |
|
|
Other income, net |
|
83 |
|
|
|
398 |
|
|
|
154 |
|
|
|
392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes |
|
6,473 |
|
|
|
3,933 |
|
|
|
9,697 |
|
|
|
4,650 |
|
|
|
Tax provision |
|
1,680 |
|
|
|
1,047 |
|
|
|
2,944 |
|
|
|
1,047 |
|
|
|
Income from continuing
operations |
|
4,793 |
|
|
|
2,886 |
|
|
|
6,753 |
|
|
|
3,603 |
|
|
|
Loss from discontinued
operations, net of tax |
|
- |
|
|
|
(2,621 |
) |
|
|
- |
|
|
|
(2,839 |
) |
|
|
Net income |
$ |
4,793 |
|
|
$ |
265 |
|
|
$ |
6,753 |
|
|
$ |
764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss)
per share: |
|
|
|
|
|
|
|
|
|
Continuing operations |
$ |
0.14 |
|
|
$ |
0.09 |
|
|
$ |
0.20 |
|
|
$ |
0.11 |
|
|
|
Discontinued operations |
|
- |
|
|
|
(0.08 |
) |
|
|
- |
|
|
|
(0.09 |
) |
|
|
Basic net earnings per
share: |
$ |
0.14 |
|
|
$ |
0.01 |
|
|
$ |
0.20 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings
(loss) per share: |
|
|
|
|
|
|
|
|
|
Continuing operations |
$ |
0.14 |
|
|
$ |
0.09 |
|
|
$ |
0.20 |
|
|
$ |
0.11 |
|
|
|
Discontinued operations |
|
- |
|
|
|
(0.08 |
) |
|
|
- |
|
|
|
(0.09 |
) |
|
|
Diluted net earnings per
share: |
$ |
0.14 |
|
|
$ |
0.01 |
|
|
$ |
0.20 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
33,120 |
|
|
|
32,052 |
|
|
|
33,047 |
|
|
|
31,880 |
|
|
|
Diluted |
|
33,831 |
|
|
|
32,686 |
|
|
|
33,819 |
|
|
|
32,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes stock-based
compensation expense, allocated as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
$ |
6 |
|
|
$ |
115 |
|
|
$ |
155 |
|
|
$ |
266 |
|
|
|
Selling, general and
administrative |
$ |
2,063 |
|
|
$ |
1,778 |
|
|
$ |
4,191 |
|
|
$ |
3,744 |
|
|
|
Research and development |
$ |
323 |
|
|
$ |
363 |
|
|
$ |
748 |
|
|
$ |
797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MERCURY SYSTEMS, INC. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In
thousands) |
|
Three Months Ended |
|
Six Months Ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
|
4,793 |
|
|
$ |
265 |
|
|
$ |
6,753 |
|
|
$ |
764 |
|
|
|
Depreciation and amortization |
|
|
3,258 |
|
|
|
3,520 |
|
|
|
6,559 |
|
|
|
7,150 |
|
|
|
Other non-cash items, net |
|
|
1,488 |
|
|
|
3,606 |
|
|
|
2,688 |
|
|
|
4,798 |
|
|
|
Changes in operating assets and
liabilities |
|
|
2,326 |
|
|
|
838 |
|
|
|
1,478 |
|
|
|
(2,306 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities |
|
|
11,865 |
|
|
|
8,229 |
|
|
|
17,478 |
|
|
|
10,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of businesses, net of
cash acquired |
|
|
(9,764 |
) |
|
|
- |
|
|
|
(9,764 |
) |
|
|
- |
|
|
|
Purchases of property and
equipment |
|
|
(1,289 |
) |
|
|
(1,218 |
) |
|
|
(3,156 |
) |
|
|
(2,123 |
) |
|
|
Decrease (increase) in other
investing activities |
|
|
- |
|
|
|
1 |
|
|
|
(185 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities |
|
|
(11,053 |
) |
|
|
(1,217 |
) |
|
|
(13,105 |
) |
|
|
(2,122 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from employee stock
plans |
|
|
1,668 |
|
|
|
1,076 |
|
|
|
2,297 |
|
|
|
1,313 |
|
|
|
Payments of capital lease
obligations |
|
|
- |
|
|
|
(160 |
) |
|
|
- |
|
|
|
(320 |
) |
|
|
Payments for retirement of common
stock |
|
|
(416 |
) |
|
|
- |
|
|
|
(4,124 |
) |
|
|
- |
|
|
|
Excess tax benefits from
stock-based compensation |
|
|
390 |
|
|
|
220 |
|
|
|
1,359 |
|
|
|
536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) by
financing activities |
|
|
1,642 |
|
|
|
1,136 |
|
|
|
(468 |
) |
|
|
1,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
|
27 |
|
|
|
(37 |
) |
|
|
63 |
|
|
|
(113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents |
|
|
2,481 |
|
|
|
8,111 |
|
|
|
3,968 |
|
|
|
9,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period |
|
|
79,073 |
|
|
|
48,876 |
|
|
|
77,586 |
|
|
|
47,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period |
$ |
|
81,554 |
|
|
$ |
56,987 |
|
|
$ |
81,554 |
|
|
$ |
56,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES |
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA, a non-GAAP measure for reporting financial performance,
excludes the impact of certain items and, therefore, has not been
calculated in accordance with GAAP. Management believes that
exclusion of these items assists in providing a more complete
understanding of the Company’s underlying continuing operations
results and trends, and management uses these measures along with
the corresponding GAAP financial measures to manage the Company’s
business, to evaluate its performance compared to prior periods and
the marketplace, and to establish operational goals. The
adjustments to calculate this non-GAAP financial measure, and the
basis for such adjustments, are outlined below: |
|
|
|
|
|
|
|
|
|
|
Interest
income and expense. The Company receives interest income on
investments and incurs interest expense on loans, capital leases
and other financing arrangements. These amounts may vary from
period to period due to changes in cash and debt balances and
interest rates driven by general market conditions or other
circumstances outside of the normal course of Mercury’s
operations. |
|
|
|
|
|
|
|
|
|
|
Income
taxes. The Company’s GAAP tax expense can fluctuate
materially from period to period due to tax adjustments that are
not directly related to underlying operating performance or to the
current period of operations. |
|
|
|
|
|
|
|
|
|
|
Depreciation. The Company incurs depreciation expense related
to capital assets purchased to support the ongoing operations of
the business. These assets are recorded at cost or fair value
and are depreciated using the straight-line method over the useful
life of the asset. Purchases of such assets may vary
significantly from period to period and without any direct
correlation to underlying operating performance. |
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets. The Company incurs
amortization of intangibles related to various acquisitions it has
made and license agreements. These intangible assets are
valued at the time of acquisition, are amortized over a period of
several years after acquisition and generally cannot be changed or
influenced by management after acquisition. |
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges. The Company incurs
restructuring and other charges in connection with management’s
decisions to undertake certain actions to realign operating
expenses through workforce reductions and the closure of certain
Company facilities, businesses and product lines. Management
believes this item is outside the normal operations of the
Company’s business and is not indicative of ongoing operating
results. |
|
|
|
|
|
|
|
|
|
|
Impairment
of long-lived assets. The Company incurs impairment charges
of long-lived assets based on events that may or may not be within
the control of management. Management believes these items
are outside the normal operations of the Company's business and are
not indicative of ongoing operating results. |
|
|
|
|
|
|
|
|
|
|
Acquisition and financing costs. The Company incurs
transaction costs related to acquisition and potential acquisition
opportunities, such as legal and accounting fees and
expenses. Although we may incur such third-party costs and
other related charges and adjustments, it is not indicative that
any transaction will be consummated. Additionally, the
Company incurs non-interest financing, bank and other fees
associated with obtaining and maintaining its financing
facilities. Management believes these items are outside the
normal operations of the Company’s business and are not indicative
of ongoing operating results. |
|
|
|
|
|
|
|
|
|
|
Fair value
adjustments from purchase accounting. As a result of applying
purchase accounting rules to acquired assets and liabilities,
certain fair value adjustments are recorded in the opening balance
sheet of acquired companies. These adjustments are then
reflected in the Company’s income statements in periods subsequent
to the acquisition. In addition, the impact of any changes to
originally recorded contingent consideration amounts are reflected
in the income statements in the period of the change. Management
believes these items are outside the normal operations of the
Company and are not indicative of ongoing operating results. |
|
|
|
|
|
|
|
|
|
|
Litigation
and settlement expenses. The Company periodically incurs expenses
related to pending claims and litigation and associated legal fees
and potential case settlements and/or judgments. Although we
may incur such costs and other related charges and adjustments, it
is not indicative of any particular outcome until the matter is
fully resolved. Management believes these items are outside the
normal operations of the Company’s business and are not indicative
of ongoing operating results. The Company periodically receives
warranty claims from customers and makes warranty claims towards
its vendors and supply chain. Management believes the expenses and
gains associated with these recurring warranty items are within the
normal operations and operating cycle of the Company's business.
Therefore, management deems no adjustments are necessary unless
under extraordinary circumstances. |
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense. The Company incurs expense
related to stock-based compensation included in its GAAP
presentation of cost of revenues, selling, general and
administrative expense and research and development expense.
Although stock-based compensation is an expense of the Company and
viewed as a form of compensation, these expenses vary in amount
from period to period, and are affected by market forces that are
difficult to predict and are not within the control of management,
such as the market price and volatility of the Company’s shares,
risk-free interest rates and the expected term and forfeiture rates
of the awards. Management believes that exclusion of these
expenses allows comparisons of operating results to those of other
companies, both public, private or foreign, that disclose non-GAAP
financial measures that exclude stock-based compensation. |
|
|
|
|
|
|
|
|
|
|
Mercury
uses adjusted EBITDA as an important indicator of the operating
performance of its business. Management excludes the
above-described items from its internal forecasts and models when
establishing internal operating budgets, supplementing the
financial results and forecasts reported to the Company’s board of
directors, determining the portion of bonus compensation for
executive officers and other key employees based on operating
performance, evaluating short-term and long-term operating trends
in the Company’s operations, and allocating resources to various
initiatives and operational requirements. The Company
believes that adjusted EBITDA permits a comparative assessment of
its operating performance, relative to its performance based on its
GAAP results, while isolating the effects of charges that may vary
from period to period without any correlation to underlying
operating performance. The Company believes that these
non-GAAP financial adjustments are useful to investors because they
allow investors to evaluate the effectiveness of the methodology
and information used by management in its financial and operational
decision-making. The Company believes that trends in its
adjusted EBITDA are valuable indicators of its operating
performance. |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA is a non-GAAP financial measure and should not be considered
in isolation or as a substitute for financial information provided
in accordance with GAAP. This non-GAAP financial measure may
not be computed in the same manner as similarly titled measures
used by other companies. The Company expects to continue to
incur expenses similar to the adjusted EBITDA financial adjustments
described above, and investors should not infer from the Company’s
presentation of this non-GAAP financial measure that these costs
are unusual, infrequent or non-recurring. |
|
|
|
|
|
|
|
|
|
|
The
following table reconciles the most directly comparable GAAP
financial measure to the non-GAAP financial measure. |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
Income from continuing
operations |
$ |
4,793 |
|
|
$ |
2,886 |
|
|
$ |
6,753 |
|
|
$ |
3,603 |
|
|
|
Interest expense, net |
|
(21 |
) |
|
|
4 |
|
|
|
(43 |
) |
|
|
9 |
|
|
|
Income taxes |
|
1,680 |
|
|
|
1,047 |
|
|
|
2,944 |
|
|
|
1,047 |
|
|
|
Depreciation |
|
1,620 |
|
|
|
1,590 |
|
|
|
3,208 |
|
|
|
3,290 |
|
|
|
Amortization of intangible
assets |
|
1,638 |
|
|
|
1,762 |
|
|
|
3,351 |
|
|
|
3,524 |
|
|
|
Restructuring and other
charges |
|
221 |
|
|
|
1,162 |
|
|
|
559 |
|
|
|
2,430 |
|
|
|
Impairment of long-lived
assets |
|
231 |
|
|
|
- |
|
|
|
231 |
|
|
|
- |
|
|
|
Acquisition and financing
costs |
|
25 |
|
|
|
- |
|
|
|
2,323 |
|
|
|
- |
|
|
|
Fair value adjustments from
purchase accounting |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Litigation and settlement
expenses |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Stock-based compensation
expense |
|
2,392 |
|
|
|
2,256 |
|
|
|
5,094 |
|
|
|
4,807 |
|
|
|
Adjusted EBITDA |
$ |
12,579 |
|
|
$ |
10,707 |
|
|
$ |
24,420 |
|
|
$ |
18,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash
flow, a non-GAAP measure for reporting cash flow, is defined as
cash provided by operating activities less capital expenditures
and, therefore, has not been calculated in accordance with GAAP.
Management believes free cash flow provides investors with an
important perspective on cash available for investment and
acquisitions after making capital investments required to support
ongoing business operations and long-term value creation. The
Company believes that trends in its free cash flow are valuable
indicators of its operating performance and liquidity. |
|
|
|
|
|
|
|
|
|
|
Free cash
flow is a non-GAAP financial measure and should not be considered
in isolation or as a substitute for financial information provided
in accordance with GAAP. This non-GAAP financial measure may
not be computed in the same manner as similarly titled measures
used by other companies. The Company expects to continue to
incur expenditures similar to the free cash flow financial
adjustment described above, and investors should not infer from the
Company’s presentation of this non-GAAP financial measure that
these expenditures reflect all of the Company's obligations which
require cash. |
|
|
|
|
|
|
|
|
|
|
The
following table reconciles the most directly comparable GAAP
financial measure to the non-GAAP financial measure. |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Cash flows from
operations |
$ |
11,865 |
|
|
$ |
8,229 |
|
|
$ |
17,478 |
|
|
$ |
10,406 |
|
|
Capital expenditures |
|
(1,289 |
) |
|
|
(1,218 |
) |
|
|
(3,156 |
) |
|
|
(2,123 |
) |
|
Free cash flow |
$ |
10,576 |
|
|
$ |
7,011 |
|
|
$ |
14,322 |
|
|
$ |
8,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES |
|
|
|
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
income from continuing operations and adjusted earnings per share
("adjusted EPS") are non-GAAP measures for reporting financial
performance, exclude the impact of certain items and, therefore,
have not been calculated in accordance with GAAP. Management
believes that exclusion of these items assists in providing a more
complete understanding of the Company’s underlying continuing
operations results and trends and allows for comparability with our
peer company index and industry. The Company uses these measures
along with the corresponding GAAP financial measures to manage the
Company’s business and to evaluate its performance compared to
prior periods and the marketplace. The Company defines adjusted
income from continuing operations as income from continuing
operations before amortization of intangible assets, restructuring
and other charges, impairment of long-lived assets, acquisition and
financing costs, fair value adjustments from purchase accounting,
litigation and settlement expenses, stock-based compensation
expense, and the tax impact of those items. Adjusted EPS expresses
adjusted income from continuing operations on a per share basis
using weighted average diluted shares outstanding. |
|
|
|
|
|
|
|
|
|
|
The
following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial measures. |
|
|
|
|
|
Three Months Ended December 31, |
|
|
|
2015 |
|
2014 |
|
|
Income from continuing
operations and earnings per share |
$ |
4,793 |
|
|
$ |
0.14 |
|
|
$ |
2,886 |
|
|
$ |
0.09 |
|
|
|
Amortization of intangible
assets |
|
1,638 |
|
|
|
|
|
1,762 |
|
|
|
|
|
Restructuring and other
charges |
|
221 |
|
|
|
|
|
1,162 |
|
|
|
|
|
Impairment of long-lived
assets |
|
231 |
|
|
|
|
|
- |
|
|
|
|
|
Acquisition and financing
costs |
|
25 |
|
|
|
|
|
- |
|
|
|
|
|
Fair value adjustments from
purchase accounting |
|
- |
|
|
|
|
|
- |
|
|
|
|
|
Litigation and settlement
expenses |
|
- |
|
|
|
|
|
- |
|
|
|
|
|
Stock-based compensation
expense |
|
2,392 |
|
|
|
|
|
2,256 |
|
|
|
|
|
Impact to income taxes |
|
(1,475 |
) |
|
|
|
|
(1,658 |
) |
|
|
|
|
Adjusted income from
continuing operations and adjusted earnings per share |
$ |
7,825 |
|
|
$ |
0.23 |
|
|
$ |
6,408 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average shares outstanding: |
|
|
|
33,831 |
|
|
|
|
|
32,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31, |
|
|
|
2015 |
|
2014 |
|
|
Income from continuing
operations and earnings per share |
$ |
6,753 |
|
|
$ |
0.20 |
|
|
$ |
3,603 |
|
|
$ |
0.11 |
|
|
|
Amortization of intangible
assets |
|
3,351 |
|
|
|
|
|
3,524 |
|
|
|
|
|
Restructuring and other
charges |
|
559 |
|
|
|
|
|
2,430 |
|
|
|
|
|
Impairment of long-lived
assets |
|
231 |
|
|
|
|
|
- |
|
|
|
|
|
Acquisition and financing
costs |
|
2,323 |
|
|
|
|
|
- |
|
|
|
|
|
Fair value adjustments from
purchase accounting |
|
- |
|
|
|
|
|
- |
|
|
|
|
|
Litigation and settlement
expenses |
|
- |
|
|
|
|
|
- |
|
|
|
|
|
Stock-based compensation
expense |
|
5,094 |
|
|
|
|
|
4,807 |
|
|
|
|
|
Impact to income taxes |
|
(4,045 |
) |
|
|
|
|
(3,615 |
) |
|
|
|
|
Adjusted income from
continuing operations and adjusted earnings per share |
$ |
14,266 |
|
|
$ |
0.42 |
|
|
$ |
10,749 |
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average shares outstanding: |
|
|
|
33,819 |
|
|
|
|
|
32,720 |
|
|
|
|
|
|
|
Contact:
Gerry Haines, CFO
Mercury Systems, Inc.
978-967-1990
Mercury Systems (NASDAQ:MRCY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Mercury Systems (NASDAQ:MRCY)
Historical Stock Chart
From Apr 2023 to Apr 2024